How spiking diesel costs translate into higher prices for everyone
Maybe you've been too busy shaking your fist at gas price signs to notice the diesel section. Keep an eye out, experts say, because it's another economic bellwether.
As of Sunday, the average cost of a gallon of diesel in the Chicago metro region was 56% more than in 2021 — and that means one thing.
“As shippers and retailers pay more for moving goods, they pass on these costs to consumers,” Northwestern University logistics Professor Hani Mahmassani said.
“Freight rates have been high across the board from ocean shipping to air to rail and of course trucking due to supply chain issues, labor shortages, etc.” Mahmassani said. “This now only exacerbates an already high inflationary environment.”
Gas and diesel prices fluctuate for myriad reasons, but one obvious driver now is the Russian invasion of Ukraine on Feb. 23. The day after, as the oil industry processed the crisis, diesel averaged $3.96 a gallon in the suburbs, AAA reported. By Sunday it was $5 a gallon, in contrast with $3.21 on March 27, 2021, AAA reported.
“A smart trucking operation can weather the storm,” Mid-West Truckers Association Executive Vice President Don Schaefer said. “Most trucking operations and most companies that have trucks look to fuel surcharges to help balance out the increased costs.”
People ask, “‘Why are my Oreos getting more expensive?' ‘Why does it cost more to get that load of dirt delivered?'” Unfortunately, “when fuel prices spike, it hits them right between the eyes,” Schaefer said.
The U.S. and its allies have leveled unprecedented economic sanctions against Russia, with the Biden administration banning Russian oil imports.
GasBuddy's Head of Petroleum Analysis Patrick De Haan explained that “heavier oils — like some of the heavier oils produced in Russia — can yield more diesel. With those off the market, refiners in the U.S. that produce or use heavier oils may have to find alternate sources,” and that can be more costly.
“So there are some challenges that have been brought on by those sanctions. Diesel is the fuel of commerce,” De Haan said.
It's also the fuel — for now — of school districts.
Indian Prairie School District 204 is paying “56 cents more per gallon on average than we did last school year and currently $1.27 more per gallon than we did at the beginning of this school year,” Transportation Director Ron Johnson said.
“We are budgeting $500,000 more next school year to adjust for the increase in fuel prices.”
Tempering the bad news, AAA reports that gas prices are stabilizing and the cost of a barrel of oil has dropped from $123 right after Ukraine was attacked to about $105.
Electric vehicles
Meanwhile, with impeccable timing, a new electric vehicle manufacturer is revving up in Will County.
Lion Electric opened its doors a week ago to a posse of congressmen plus state and local leaders who toured the plant where electric trucks and school buses will be built.
Lion expects to create about 1,400 jobs at the Channahon site and start its assembly lines in late 2022. Up to 20,000 vehicles will be built a year, officials said.
During the March 21 event, U.S. Environmental Protection Agency District 5 Administrator Debra Shore said an announcement about how schools can apply for $5 billion in grants to help pay for zero- or low-emission buses is coming soon.
“More than 25 million children drive the bus to and from school every day, many breathing polluted air from diesel school buses,” Shore said.
Funding assistance will be key for districts. Lion buses “are tracking in the low $300,000s,” Lion executive Nate Baguio said. The buses can travel up to 155 miles without a charge.
Traditional diesel buses run between $80,000 and $100,000.
For the grant, the EPA says it may prioritize tribal schools, high-need, rural or low-income districts; and applicants with cost-sharing arrangements in place such as public or private partners, grants or bonding.
Electric buses do save money over the long run, with no fuel costs and limited maintenance, advocates point out.
Lion trucks are intended for urban deliveries with a range of up to 250 miles.
Gridlock alert
Drivers in Elgin should brace for lane closures on Irving Park Road between Route 25 and Route 59 starting Monday as IDOT crews patch and resurface. The project will last through early October.
And, Glenview drivers should expect delays as work on the intersection of Willow and Pfingsten roads resumes this week. The widening and resurfacing job should wrap up in August.
One more thing
Lake County debuts a new transit service for seniors and riders with disabilities on May 1. To learn more or register for Ride Lake County, call the Pace Call Center at (800) 201-6446.